Is UAL Seeking Friendlier Skies?

Shares rose Monday amid reports the United Air Lines parent may be looking for a merger partner

UAL Corp. (UAUA), Illinois-based parent of United Air Lines, has reportedly hired Goldman Sachs & Co. to advise it on financial alternatives including a possible merger.

Stock in UAL gained 2.7% in price to $28.58 per share in early Nasdaq trading on Monday, Sept. 25.

Crain's Communications' Chicago Business said Sept. 25 that people close to United expect Goldman to help the airline assess the value of its domestic and international holdings, advise it on sales or purchases of domestic or international routes and scout for mergers. Continental Airlines Inc., based in Houston, and Atlanta-based Delta Air Lines Inc. are considered to be United's likeliest merger partners, Crain's said.

The airline industry has benefited in recent weeks from falling oil prices, whose soaring heights during recent years pushed up fuel costs, exacerbating airline companies' difficulties negotiating with labor unions (see, 9/25/06, "S&P Boosts Continental, US Airways"). United emerged from bankruptcy in recent months.

Chief Executive Glenn Tilton had already hinted to reporters about plans for consolidation in recent days. He had said in a speech Thursday to the Executives' Club of Chicago that United's parent UAL is on solid footing to participate in the merger and acquisition market, according to a Dow Jones Newswires report on Sept. 21. Tilton didn't name any airlines that might come into play. But he said that someday U.S. airlines may become financial partners with airports and commended the German airline Lufthansa AG's investment in companies that operate airports in Germany, according to Dow Jones.

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